Buy Gold – 15 September 2021
Today’s free forex signals service is a buy on the Gold as we expect the market to observe dollar correction after a US CPI led jump.
After a softer than expected US inflation report, gold prices recovered overnight. As the Fed’s preferred metric to ignore volatile food and energy prices, core consumer prices rose 4.0% y/y. In a Bloomberg poll, analysts expected this to be 0.2% higher. Further, July’s price growth through the consumer price index slowed by 4.3% in August.
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As US Treasury yields declined, the bullion was able to move higher. This is because inflationary pressures are easing, suggesting the Federal Reserve may ease off its balance sheet tapering and expand its ultralight monetary policy in the coming months, both of which stimulate government bond purchases. As a result, the yield on the benchmark 10-year bonds fell 4.4 basis points. Gold, being a non-yielding asset, moves higher when yields are lower.
Under pressure from the consumer price index, the 10-year Treasury Inflation Index (TIPS) yield fell overnight. This is a measure of real returns that are not impacted by inflation and are highly correlated with gold prices. In this case, as with Treasury bonds’ nominal yields, the real yield declines when the opportunity costs of precious metal owners decrease; however, a real yield is considered a more accurate measure of ownership costs.
Gold bulls should beware since prices remain well above the Fed’s 2% average target. It certainly helps portray the Fed’s view of temporary inflation if growth pressures are eased. However, some market participants overreacted to the Fed’s willingness to tighten based on the rate hike. Once the Fed cuts back on bond purchases, a decrease in demand for bonds will put upward pressure on yields. This will negatively affect the price of gold.
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Free forex signals – buy Gold at 1,811.04
Instrument: GOLD (XAUUSD)
Order Type: BUY STOP
Entry price: 1,811.04
Stop Loss: 1,796.01
Our Risk Setting: 1%
Risk / Reward Ratio: 1:1.5
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